New business case study makes the case for Metro-Femtocells

Accurate cost analysis to justify the deployment of femtocells in public areas can be difficult to come by. Although the Femto Forum provides a detailed business case analysis spreadsheet template for its members, few operators are likely to release sensitive commercial figures about their operating costs. However, Alcatel-Lucent has studied this issue in depth and published their findings in a new report out this month. Sofia Flores, Sr. Product Marketing Manager at Alcatel-Lucent, provided further insight into the study.

The primary driver is capacity

You would have to be working in a salt mine not to have seen the constant reminders to the industry of the impending data traffic demand forecasts for the next few years. At almost every conference, graphs are shown with mobile data traffic growth off the scale which revenues don’t match. Alcatel-Lucent forecast mobile data traffic growth of 30x between 2010 and 2015. Network operators have to find ways to deliver this high capacity as cost-effectively as possible.

Traditional solutions have their limits

At this month’s Mobile Data Optimisation conference (read my full report here), network planners explained how they were currently adding capacity at existing cellsites. Those with additional frequency spectrum were adding 2nd and 3rd carriers to their 3G network, but this has its limits. One planner explained how the natural topology of their country (it has lots of hills) meant there was a lot of interference, presenting challenges which increased when the higher speed HSPA was used. It also meant they couldn’t easily use their full set of 3 carriers everywhere and had effectively assigned one for use in the difficult, interference prone areas.

With this traditional approach, additional macrocell and microcell sites will inevitably be required to increase capacity further. These both have long lead times – it can take months to negotiate with landlords and planners – and typically cost hundreds of thousands of Eurosto install.

The Metrocelll alternative

The femtocell industry has developed a technical alternative for outdoor urban areas (which some call Metrocells), where a number of small “hotspot” basestations are sprinkled around high traffic areas. Pedestrian and stationary users camp on to these, relieving the macrocell network. These operate with any 3G phone – no special handsets or dongles are required – and support all existing voice and data services.

Because these are designed using very cost effective femtocell components, the total budget can be very attractive. Femtocell software, refined over several years of operation in difficult residential environments, is sophisticated enough to be self-configuring and self-optimising – important to reduce the planning and operational management of the solution.

Unlike residential femtocells, these are “open access” and can be used by any customer of the network operator. They are owned and installed by the operator themselves, and can share the same femtocell gateway and other back-office systems used for residential and/or enterprise femtocells.

Comparing Macro expansion with Metrocells

The analysis defined a typical case for an operator with both fixed (wireline) and mobile (wireless) assets over a 5 year period. It assumed there were already 28 Macro sites covering this urban area which had to be expanded, and a further 11 installed. The total cost of this approach was estimated at €1.43M.

By comparison the Metro-Femto approach totalled €0.64M, some 45% lower than the macro only approach. Even though many more small cells are involved – over 140 in this example – the individual costs for hardware, installation, site rental and backhaul are all very significantly lower.

Cashflow

A closer analysis reveals a more steady level of investment is required for the metro-femto approach since the cost is more evenly spread across years 3 to 5 – around 200K per annum.The Macro expansion case shows rapidly escalating costs which grow from 77K in year 3 up to 1.1M in year 5.

The radio access budget planning cycles for network operators aren’t really able to cope with such rapid and possibly unforeseen growth rates.

What this suggests to me is that while the current strategy of simply adding extra carriers to 3G cellsites combined with slowly increasing the number of cellsites might appear to meet today’s traffic demands, there will come a time when this approach will require a sudden (and possibly unplanned) growth in CAPEX to remain competitive. Even were funds are available, long cellsite acquisition and deployment times (6 months is not unusual), would make it more difficult for network operators to respond.

Strong competitive advantage

What the business case study shows is that network operators who prepare well in advance, and have metro-femto capability in place within the next 2-3 years, will have a strong competitive advantage. This will allow them to respond quickly to position additional capacity in identified hotspot areas, with more even and sustainable investment levels. Those that adopt Metro-Femto early can use the time to familiarise themselves and their engineering teams with the operation, capabilities and constraints of these small cells over the next 1-2 years. This will give them a choice of how they want to respond in meeting increased data demands, balancing the options of expanded macro cellsites, additional spectrum, LTE with the choice of metro-femto.

Other advantages

The study also highlights some further benefits of the metro-femto approach. Their small footprint and unobtrusive appearance allows them to be deployed almost anywhere. They can be mounted outside a building, on a street pole or indoors in public areas.

By offloading heavy users, this also frees up precious capacity in the macrocells which can reach fast moving users or those in less populated areas.

In the short range, the metro-femto approach improves radio link performance, which translates to higher data rates, lower latency and better quality. Users can watch that video clip, enjoy higher quality voice and faster web access.